I researched this topic quite a bit but I still find it very confusing. Please kindly help.
For my data, I traded "PROSHARES SHORT VIX SHORT-TERM FUTURES ETF (SVXY)" in 2020. I sold all my shares at a loss, and I received a Final K-1.
But first of all, I am not going to trade those ETFs that would give out a K-1 again anymore. It's simply too much a pain/hurdle to file tax for it. For those who want to avoid this kind of tax pain, see this list for Proshares: https://www.proshares.com/k-1_tax_information/
Here is what's on my K-1:
Beginning capital account: 0
Capital contributed during the year: 29,905
Current year net income (loss): -1,924
Other increase (decrease): 0
Withdrawals & distributions: (27,981)
Ending capital account: 0
So my understanding is that the partnership loss of $1,924 has passed to me based on my shares and holding period with Proshares, and this loss is conceptually different from my buy/sell transactions of SVXY with my broker (which have already been reported in 1099-B).
Now I want to include this $1,924 loss somehow in 1099-B to adjust the cost basis in 1099-B so that the capital loss carryover is not double counting.
How do I enter that in 1099-B? I believe this needs to be entered as a total number. But there's no up-to-date tutorial in this regard. Please provide as much detail as possible. Thank you!
After I learn the correct method, I promise to post the final solution in this message thread.
p.s. I believe the answer lies within here: https://www.irs.gov/instructions/i1065sk1
"Partner's Instructions for Schedule K-1 (Form 1065) (2020)".
Look at the section "Publicly traded partnerships (PTP)",
where we (investors) are the "Partner" and Proshares is the "Partnership".
Specifically, it says the following:
"4. If you have an overall loss and you disposed of your entire interest in the PTP to an unrelated person in a fully taxable transaction during the year, your losses (including prior year unallowed losses) allocable to the activity for the year are not limited by the passive loss rules. A fully taxable transaction is one in which you recognize all your realized gain or loss. Report the income and losses on the forms and schedules you normally use."
